K.L. Rekhi, Member (T)

1. The appellants manufactured and cleared mono-bloc pump-sets. The common point of dispute in these 20 appeals is whether the central excise duty on the electric motor portion of the pump-set, which was realised by the appellants from their customers through a separate entry in the sale invoice for the pump-set, should be added to the assessable value of the pump-set for charge of central excise duty thereon. The period involved generally is from 1-10-75 to 30-9-76.

2. We have heard both the parties, perused the record and given the matter our earnest consideration. In the case of T.R. Industries, we have particularly examined their written submissions in view of their letter dated 27-3-1987 requesting us to decide their appeal without their personal presence.

3. It is now the settled position in law that the full intrinsic value of an article must include the cost of all its raw materials and components, vide the Supreme Court judgment in the case of Empire Industries Limited, 1986(20) E.L.T. 179 (S.C.), paragraph 47. The taxes paid on the raw materials and components are certainly a part of their cost. Under Section 44(4)(d)(ii) of the Central Excises and Salt Act, 1944, the assessees are entitled to ask for exclusion of the taxes paid on the finished goods ("such goods"), which are the subject of assessment, but not of the taxes paid on the raw materials and components which go into the manufacture of the finished goods, vide order No. 700/86-A dated 28-8-1986 : MANU/CE/0121/1986 : 1986(26) ELT 250 (Tribunal) passed by this Tribunal in Appeal No. E-2884/84-A of M/s. Khaitan Fans (P) Ltd. This order of the Tribunal received confirmation of the Hon'ble Supreme Court when the appeal filed by the assessee (Civil Appeal Nos. 106-107/87) was dismissed by a Full Bench of the Supreme Court on 10-2-1987. Further, with the amendment of Section 4(4)(d)(ii) in 1982 (insertion of the Explanation) which had retrospective effect from 1-10-1975, it is also now settled that only that much duty can be deducted from the cum-duty sale price of the article which is actually paid by the assessee on the article ("such goods") to the Government. It is in the light of these principles of valuation that we have to decide this batch of appeals.

4. Basically, two arguments were pressed before us on behalf of the appellants. The first was that in the course of manufacture of mono-bloc pump-sets, an electric motor as such did not come into existence in an identifiable manner; only rotors and stators came into existence and as such there was no question of payment of duty on electric motors at the intermediate stage. Even if factually correct, this argument suffers from two flaws. First, assuming that an electric motor as such does not come into existence, rotors and stators would, in any case, have to pay duty as components of electric motors under item 30(4) of the tariff. For the purpose of the costing of the final product, it is immaterial whether duty on its raw materials and components was paid under this item or that of the tariff. The material point is that if the duty was paid, it has to enter into the value of the finished goods. Secondly, even assuming that no duty, whether on the motors or on rotors and stators, was payable, still, if the appellants collected some amount from their customers by way of such duty but did not pay it to the Government, it would yet become a portion of their price realisation for the finished article and, consequently, it would have to be included in the assessable value of the finished article. This argument of the appellants has, therefore, no substance.

5. The second argument of the appellants was that during the material period exemption notification No. 84/72-CE, dated 17-3-1972 was in force and that this notification provided for a set off being given for duty paid on electric motors or rotors or stators of the pump-sets. This, in effect, meant that the appellants paid duty on the mot